New HD does not appear in "select destination"

I just purchased a WD 500GB HD to swap for my 80GB HD in my 2.5 year old MBP. After i swapped them carefully, i inserted the original OSX install disk, and everything seemed fined until i came to the "select destination" part. There is nothing to select!
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The disk appears in both disk utility and system profiler, so what is the problem?

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